If competition drives a company out of business, well, so be it. That's how the free enterprise system works. It's the American way.
But independent gasoline retailers in Utah don't see it that way.They talk of "big oil" selling gasoline so cheap the little guy can't survive. Then once the pesky independents are out of the way, the major refiners will have control of the wholesale and retail markets and pump prices will soar out of sight.
They warn consumers that such "predatory pricing" may look like a bargain now, but it will mean high gasoline prices in the long run.
But big oil doesn't buy the theory.
"It makes for a good argument, but it really doesn't hold water," says Randy Couch, Salt Lake manager for Amoco Oil Co., which operates a refinery in North Salt Lake and the Rainbo service station chain.
The two sides took their ongoing feud to the Legislature this past session, and this week a legislative interim committee decided to let them form a committee to meet for the next few months and come up with legislation that will allow them to compete without too many casualties.
To prevent any price setting meetings and avoid the appearance of an anti-trust violation, representatives from the attorney general's office and the state Division of Consumer Protection will also take part in the public meetings.
A law already exists that prevents predatory pricing. It prohibits a gasoline retailer from selling below cost - the wholesale price of fuel plus six percent for overhead. It's difficult to enforce, however, as it requires state authorities to find the first service station to sell below cost, because it's not illegal to sell below cost if a retailer is just following the competition.
Lawmakers this year amended the Motor Fuels Marketing Act to make it easier for investigators to track down the violator by making retailers that sell below cost record which competitor they followed.
But that apparently didn't satisfy the independents. A coalition of independent gasoline marketing associations got a bill filed that would simply outlaw refiners from retailing gasoline at all. Such so-called divorcement laws exist in Nevada, Virgina and several other states.
That's when local refinery operators and the little guys decided to talk it out and the legislation was tabled.
Utah isn't the only state where independents claim major oil companies are selling below cost to muscle market share away and eventually monopolize the retail business. The Petroleum Marketers Association of America says independents in most states are crying foul and are worried for their survival.
The independents' realize their quest to keep major refiners from selling gasoline too cheap appears anti-consumer. "The public sees it as preventing low prices, but it's our only chance," said Glade Sowards, Utah state director for the Western Petroleum Marketers Association.
But Sowards is confident the independents and major oil companies will work out a compromise.
Hugh Dickey, local spokesman for Chevron, said the committee will work something out because big oil wants the small service station to survive.
"We rely heavily on independent dealers to buy our product, so it is in our interest that they succeed," he said.
Gas retailers hike prices as much as 10 a gallon
Reacting to the wholesale price surpassing the price at the pump, gasoline retailers hiked prices as much as 10 cents a gallon along the Wasatch Front this week.
"It's a big relief," said Mark Walker of Walker Oil in Pleasant Grove. The company has sold unleaded regular for 99 cents a gallon for more than a week as its wholesale costs inched up from 97 cents a gallon last week to $1 a gallon.
But a jump to an average of $1.05 a gallon on Wednesday released the price squeeze experienced by many service station operators along the Wasatch Front.
Refiners attributed the price rise in wholesale fuel to three factors: recent rise in oil prices, refinery repairs reducing the supply of refined gasoline, and the seasonal increase in demand for gasoline that will continue to push prices up throughout the spring and early summer.